Problem:
Job costing with multiple direct-cost categories, single indirect-cost pool, law firm (continuation of 5-29). Hanley asks his assistant to collect details on those costs included in the $21,000 indirect-cost pool that can be traced to each individual job. After analysis, Wigan is able to reclassify $14,000 of the $21,000 as direct costs:
|
Other Direct Costs
|
Widnes Coal
|
St. Helen's Glass
|
|
Research support labor
|
$1,600
|
$ 3,400
|
|
Computer time
|
500
|
1,300
|
|
Travel and allowances
|
600
|
4,400
|
|
Telephones/faxes
|
200
|
1,000
|
|
Photocopying
|
250
|
750
|
|
Total
|
$3,150
|
$10,850
|
Hanley decides to calculate the costs of each job as if Wigan had used six direct cost-pools and a single indirect-cost pool. The single indirect-cost pool would have $7,000 of costs and would be allocated to each case using the professional labor-hours base.
1. What is the revised indirect-cost allocation rate per professional labor-hour for Wigan Associates when total indirect costs are $7,000?
2. Compute the costs of the Widnes and St. Helen's jobs if Wigan Associates had used its refined costing system with multiple direct-cost categories and one indirect-cost pool.
3. Compare the costs of Widnes and St. Helen's jobs in requirement 2 with those in requirement. Comment on the results.